One of an escrow officer's simpler jobs is calculating the amount of property tax that is payable by the buyer and the seller on any given real estate transaction. One of the agent's tougher jobs can be explaining to the buyer why he may get an official property tax adjustment bill months after the sale is done. Let's wade into the arithmetic and explain the situation.

Property Tax Defined

Every property gets assessed by the county assessment office every year, establishing the amount of tax due on that property. At the time of a sale, it's a simple matter for the escrow agent to find out the property's tax for the full year, and apportion the correct amount to the seller for the year to that date, and the right amount to the buyer for the remainder of the year.

Sale Triggers Assessment

The complication arises because a property sale triggers a new assessment. This assessment happens according to the schedule and timetable of the county assessment office; this means it could happen months after the transaction has closed, when the buyer has long since thought the sale over and done with.

When it eventually occurs, the property has a new assessed value --- and a new tax burden--- retroactive to the date of the sale. It might be more or less than what the buyer paid on the closing statement, but chances are good that it will be different. Therefore, the assessment office will issue an adjustment notice.

Escrow Works With The Numbers

The escrow officer's job with prorating property tax is just to work with the existing numbers. He uses the property tax amount provided to him by title at the time of the escrow (the current property tax amount). He takes this current tax information and allocates the charges to the parties accordingly.

That's why, in an appreciating market, a buyer can get an additional tax bill, months after the sale, when he thought it had already been covered. And that is why, in a depreciating market, the potentially reduced taxes on the home cannot be determined and applied at escrow. For specific tax questions related to a particular parcel, further information can be gained by contacting your county's tax recorders office.